This review examines fairy rings in temperate grasslands and their ecological role, highlighting their occurrence in Hungary. It presents the 92 fungal species recorded in Hungary that form these structures and provides a detailed discussion of the ecological mechanisms behind ring formation, their growth rates (which vary from 7 cm to 125 cm per year depending on the species), and the various classification systems. Their ecological role is complex and dual: some species (Type 1) harm vegetation at the fungal front (e.g., through soil hydrophobicity and phytotoxic compounds), while in the inner zone of the rings, they stimulate growth and increase diversity, partly by promoting the proliferation of arbuscular mycorrhizal (AM) fungi. Therefore, fairy ring fungi are ecosystem engineers: they fundamentally influence nutrient cycles, soil microbial communities, plant diversity, and biomass production. Some of the compounds they produce (fairy chemicals) show remarkable potential for agricultural application. Research on fairy rings – despite being crucial for understanding the functioning of grassland ecosystems – is still insufficient. An interdisciplinary approach, the application of remote sensing technologies, and the use of mathematical modelling in future research could contribute to the protection, restoration, and climate change adaptation of grasslands.